Question

If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 101st unit of good X is 5Y, then the opportunity cost of producing the 201st unit of good is X is most likely to bea. less than 5Y.b. more than 1/5Y but less than 5Y.c. more than 5Yd. less than 1/5Y but more than zero.e. none of the above

Answer 1

The correct answer is option c.

Step-by-step explanation:

Opportunity cost is the cost of sacrificing the second-best alternative. We know that resources are scarce and have alternative uses. To increase the production of one good we need to decrease or give up production of its alternative.

The law of opportunity cost states that the as we go on increasing the production of one good the opportunity cost will go on increasing. In other words, to produce more and more of good X we will need to sacrifice more and more of good Y.

If the opportunity cost of producing the 101st unit is 5Y then the opportunity cost for the 201st unit will be more than 5Y.